At the end of your company’s fiscal year, you need to organise yearly accounts for HMRC,
If you have not yet completed your limited company formation or you are in the first year of trading; you will need to understand what annual accounts are and when you need to file them
The Annual (yearly) accounts are usually described as ‘financial accounts’, ‘company accounts’ or ‘statutory accounts’.
The main aim of yearly accounts is to present a comprehensive report of the financial activity of your limited company during its latest financial year. This is generally a one year period. The information in the accounts will be used to prepare a Company Tax Return for HMRC and estimate the amount of corporation tax your company owes.
Things to incorporate
Full statutory (constitutional) accounts need to include:
- A balance sheet – this indicates the value of everything owned by your company.
- A profit and loss account – this indicates the sales of your company, running costs as well as the loss or profit it made for the period of its latest fiscal year
- Comments as regards the accounts
- Report from a director
- Report from an auditor – this is based on your company size
- The name and signature of director on the balance sheet
A few businesses are exempt from setting up complete constitutional accounts for Companies House. ‘Small’ businesses and micro-entities are allowed to prepare shortened accounts consisting of a balance sheet and notes however they need to still prepare constitutional accounts for their members and comprise constitutional accounts with the Company Tax Return for HMRC.
A business is deemed ‘small’ for the reason of preparing yearly accounts for Companies House if it can fulfil two of the criteria listed below:
- Has £3.26 million or less on its balance sheet
- Has annual turnover of at most £6.5 million
- Has 50 workers or less
Should your business be small, you can choose to submit an application for audit exclusion and decide on whether to forward a copy of the director’s report to Companies House.
A micro-entity is a very small business that fulfils a minimum of 2 out of the criteria listed below:
- Has annual turnover of £632,000 or less
- Has £316,000 or less on its balance sheet
- Has 10 employers or less
Micro-entities are allowed to put together even simpler accounts compared to small companies, and they profit from the same exclusion that are accessible to small companies.
Dormant (inactive) companies
Should your company be dormant (inactive), you only need to put together inactive accounts for Companies House, and there won’t be any need for an audit. Dormant (inactive) accounts consist of notes and a balance sheet.
The yearly accounts generally span over a period of 12 months. The closing date for delivering yearly accounts to Companies House is 9 months following the accounting reference date (ARD). This marks the end of your company’s fiscal year and it normally falls on the last day of the month of the incorporation anniversary.
On the other hand, should your company’s first fiscal year exceed 12 months (this generally happens), you must file your first yearly accounts with Companies House in 21 months of incorporation, instead of 9 months. Every subsequent account will be due in 9 months of the accounting reference date.
Limited Liability Partnerships accounts
Limited Liability Partnership accounts must be arranged at the end of every fiscal year to report the collective business activities of all Limited Liability Partnership members. The accounts’ duplicate should be given to every Limited Liability Partnership, every debenture holder including Companies House. Similar to limited companies, micro-entities and small Limited Liability Partnerships can arrange abbreviated accounts for Companies House, and inactive Limited Liability Partnerships only need to arrange dormant (inactive) accounts. The qualifying criteria are similar as it is for limited companies.
The first accounts of LLP span over the period started on the incorporation date, and not the first day of trading. The accounts end on the accounting reference date, or about 7 days on both sides of that date. Every future account starts on the day after the earlier accounts ended, on the accounting reference date, or about 7 days on both sides of the ARD.
Should you be filing your LLP’s first accounts and they span over an excess period of 12 months, you must forward them to Companies House in 21 months of the incorporation date – or in 3 from the ARD, whichever is longer. Accounts covering 12 months or less must be delivered to Companies House inside 9 months of the ARD.
Limited Liability Partnership accounts should be approved by every member and signed on their behalf by a chosen member.